REAL ESTATE NEWS

Investor interest in the industrial sector remains strong despite uncertainty around the potential impact of tariffs and inflation on economic performance, as well as lower consumer sentiment.

Overall, Industrial remains a preferred asset class for investors, even as operational performance has slowed, said Al Pontius, national director of Marcus & Millichap’s office and industrial division. Deliveries are expected to outpace absorption again this year, which will cause the national vacancy rate to increase to approximately 7.5% by the end of the year.

Investor interest remains strong for several reasons, according to Pontius. To start with, pricing cap rates have responded to the increase in interest rates as well as the subdued growth pattern of rental rates in the current environment. As a result, there are more opportunities to invest than just a couple of years ago, he said.

In addition, buyers are drawing confidence from an expected slowdown in industrial deliveries over the next few years, as evidenced by the lead time for delivering new product now reaching nearly two years.

“Something else to remember is we're now just coming off of what I might refer to as a post pandemic surge in industrial space demand,” said Pontius.

“We went through a period of time where there were great concerns about supply chains and making sure that suppliers had the right amount of inventory to meet consumer and business demand. That time has come and gone now to the extent that we've rebalanced, we're living in a more normalized supply-demand relationship, and the anticipation would be, given the fallback in deliveries anticipated over the next few years, we're going to see vacancies begin to decline starting again in 2026.”

Source: GlobeSt/ALM